👟 Will Allbirds Make It Despite Competition?

Tesla skids again; Cathie Wood's warning.


Hey Global Investor! Here’s what you need to know before the US markets open.

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S&P 500 (Tuesday’s Close) 4,685.25 -16.45 (0.35%)

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👟 Allbirds: Will It Catch The Worm?

Eco-friendly footwear manufacturer Allbirds Inc. (BIRD) made a smashing debut on the exchanges last week, ending over 90% higher on day one. While it continues attracting investors with its unique concept, teething issues remain, which may cause worry. (Tweet This)

Football To Footwear

The idea of Allbirds first came to co-founder Tim Brown while he was the vice-captain of New Zealand’s football team. While he made leather shoes for his friends during his spare time, he knew how uncomfortable they could be. To make them less so was a quest he undertook, and to facilitate this, he was awarded a grant by the New Zealand wool industry in 2014.

Brown then raised $119K through crowdfunding on Kickstarter in just five days. After that, he got connected to Joey Zwillinger, an expert in renewable materials, and they started collaborating on Brown’s quest. Allbirds was launched in March 2016. New Zealand barely has native land mammals. It is a land of “all birds.” This was the genesis of the company’s interesting name.

Allbirds raised funds worth $7.25M from investors like Maveron, Lerer Hippeau Ventures, and others in its first year of existence. The company launched with a single product – Wool Runner casual sneakers – which became a bone of contention with a footwear giant.

In December 2017, Allbirds sued Steve Madden by filing a trade dress infringement lawsuit in the Northern District of California. It stated that Steve Madden’s “Traveler” women’s sneaker copied its woolen running shoe’s signature style. Steve Madden counterclaimed, saying that Allbirds’ product is “generic, lacks secondary meaning, and is merely ornamental.”

The company became a unicorn in October 2018, raising $50M in a Series C funding round at a valuation of $1.4B. In September last year, it raised $100M in a funding round led by Franklin Templeton, T. Rowe Price, Baillie Gifford, and others. That funding round valued the company at $1.7B.

Spreading Wings In A Turbulent Sky

This past August, the company launched a collection of activewear, becoming the latest entrant in this hyper-competitive category. The line includes high-waisted leggings, biker shorts, and a running tank with a built-in bra. The company’s differentiating factor is its “carbon footprint” tag.

While designing these products, the company avoided using polyester, which according to them, spews 700MT of carbon into the atmosphere each year. Instead, Allbirds has used eucalyptus tree fiber and merino wool for its product designs. This was preceded by its socks launch in August 2019 and four clothing items launch in October 2020.

In the IPO, the company targeted a valuation of $2.2B, offering 19.2M shares, priced between $12 to $14 apiece. It then raised the price to $15 apiece and 20.2M. On its trading debut, shares opened at $21.21, a premium of 41% to its IPO price. Allbirds ended the day at $28.64, up nearly 91% from its IPO price and a valuation of $4.1B.

On the business front, Allbirds reported a net loss of $14.5M in 2019, which widened to $25.9M in 2020. For the three-month period, which ended in September, the company expects to report a net loss of $15M – $18M compared to a loss of $7M a year ago. Revenue for the first six months of the year grew 27% YoY to $118M. The management expects to break even soon.

The company has very few brick-and-mortar stores (27 to be precise). 89% of its total sales in 2020 came from e-commerce. It does hope to ramp up on the physical presence.

Allbirds is not an early bird. While it still hopes to catch the worm, the lack of profitability and competition with incumbents such as Nike, Lululemon, and others will require a lot of staying power in the marketplace to make an impact. To this end, maybe the eye-watering gains on debut might be just what the doctor ordered.

What happens now, is firmly in the hands of the investors!

Market Reaction
BIRD ended at $21.75, down 11.44%. Shares are down 25% after the 90% jump on its trading debut.

Company Snapshot 📈

BIRD $21.75 -2.81 (11.44%)


Newsworthy 📰

Slide: Tesla shares skid again as investors brace for possible Musk stock sale (TSLA -11.99%)

Foresight: Roblox founder and CEO says their business plan 17 years ago predicted the rise of Metaverse (RBLX +42.23%)

Red Flag: Cathie Wood says Zillow’s decision to shut iBuying unit could be a warning sign for the housing market (ZG -2.36%)


Later Today 🕒

  • Walt Disney Co. Earnings (DIS)
  • Oracle Corp. Earnings (ORCL)
  • Automatic Data Processing Inc. Earnings (ADP)
  • Affirm Holdings Inc. Earnings (AFRM)
  • Fox Corp. Earnings (FOX)
  • SoFi Technologies Inc. Earnings (SOFI)
  • Marqeta Inc. Earnings (MQ)
  • Atmos Energy Corporation Earnings (ATO)
  • Brooks Automation Inc. Earnings (BRKS)
  • Performance Food Group Co. Earnings (PFGC)
  • Beyond Meat Earnings (BYND)
  • Wendy’s Co. Earnings (WEN)
  • Payoneer Global Inc. Earnings (PAYO)
  • Holley Inc. Earnings (HLLY)
  • Fossil Group Inc. Earnings (FOSL)

 

Today’s Market Terminology: Rights Issue

A rights issue or rights offer is a dividend of subscription rights to buy additional securities in a company made to the company’s existing security holders


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